Two Nations: Richer and poorer: Britain's cities have their own north-south divide

THE BRITISH economy is haunted by a perpetual weakness, its north- south divide. For more than 20 years, the decline of manufacturing industry in each recession and its failure to keep up with each recovery has driven a wedge between the regions on almost any index - incomes per head, house prices, unemployment rates.

The latest signal comes from population figures, with more Northerners getting on their bikes to live and work south of the Wash. Yet the economic map of our two nations is more subtle than the crude north-south division.

For the chasm is explained by the location of the fast- growing, wealth-creating businesses, especially in industries propelled by new technologies. Most of these are in the south of England, but by no means all. Some towns, which could have stayed trapped in a post- industrial wasteland outside the prosperous South-east, have managed to turn themselves into islands of growth. There is a great distance between Leeds and Sheffield, although they are geographically close. Equally, there are pockets of failure across southern England. Nowhere are the contrasts between success and failure starker than in London. The massive wealth and zero unemployment of the City of London lie just a mile or so from the country's worst concentrations of poverty and deprivation.

The UK is unusual in the extent to which the capital city dominates the economy. London has always seen the extremes of riches and poverty go cheek by jowl. But a century ago the north-south divide was in other respects the reverse of today's pattern. New manufacturing industries were creating the national wealth, and were the making of Glasgow and Liverpool, Sheffield and Derby, Manchester and Birmingham. Economic activity is always geographically clustered, but new industries redraw the map.

Today the fastest-growing industries, those contributing most to increases in national output and creating the most jobs, are in services and high technology. Even though hi-tech businesses still account for a small proportion of total employment, they can account for a lot of growth. One recent US study found that the presence of a successful hi-tech sector explained two-thirds of the difference in growth rates between cities.

What is more, many of the rapidly expanding service industries depend in some way on new technologies, even though they could not be described as high-technology themselves. Call centres are the prime example, a product of modern telecommunications and computers. There are more than 7,000 in the UK, employing a workforce of about 250,000. This is about 1 per cent of total employment, a proportion expected to double by 2001.

While companies use call centres to decentralise part of their operations to a cheaper location, the centres themselves tend to cluster in certain places. The reason seems to be that, as well as looking for the telephone infrastructure and suitable buildings, they need to draw on a big enough pool of people with suitable skills - minimum educational attainment, good telephone manner, pleasant accent, even knowledge of foreign languages. This narrows the choice to fairly big towns, and a handful - notably Leeds and Glasgow - have come to dominate the call-centre industry.

So even though the leading-edge technological industries tend to be found in southern clusters - biotechnology in Oxford and Surrey, software in Cambridge, high-value financial services in London, and so on - technology- driven growth has also contributed to the development of some northern economic hotspots.

It is ironic that just as the spread of cheap, modern computer and telecommunications technologies is driving forward the globalisation of national economies, economic success is becoming increasingly focused on specific locations. A "winner-take-all" pattern of growth is emerging in the economy.

Once a town develops one industry, perhaps by pure chance, success tends to breed success. There is a virtuous circle of growth as jobs give local people money to spend, which encourages other new business, which expands because there is a suitable local labour force. The presence of a university helps, as do quality-of-life factors such as easy access to countryside or pleasant old buildings in the town centre. The renovation of local housing and commercial properties starts, shops move in, wine bars open, and before you know it there is a new art gallery and the first yuppies have parked their BMWs.

But there are spirals of decline around the country, including in the most thriving southern towns and cities. The Department of the Environment, Transport and the Regions has identified more than 1,600 very deprived urban wards around the UK, mainly in the declining northern industrial and mining areas or in London. A few are to be found in other cities once based around docks and manufacturing, such as Bristol, Swansea and Portsmouth.

As the department's recent research points out, local problems can easily be masked by looking at regional data. "As a region, London has the highest GDP per head but the greatest scale of intensity of deprivation," it notes.

Just as success can become embedded, so can decline. An absence of local jobs fosters crime and drug-taking, young people lack the experience of work and therefore the basics of employability (such as an ability to turn up on time and be polite to their colleagues), the housing stock deteriorates, local businesses including bank branches and post offices close or move out.

So London and other cities in the South and Midlands combine wards of near-zero unemployment with wards such as Hackney North and Stoke Newington in London where more than one in four adults seeking work is unemployed. The gap between our two nations is more than a north-south divide.

Leading article,

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